Thursday, March 26, 2009

This Is Shocking, Even to Us: Alleged $30 Million Extortion By Hevesi Campaign Manager

By Henry J. SternMarch 20, 2008

The most shocking political news of the year came today in the indictment in New York County by a 23-member grand jury of Hank Morris, former campaign manager for former City and State Comptroller Alan Hevesi, and David Loglisci, former top investment officer of the New York State pension fund. The indictment followed a two-year investigation by the office of State Attorney General Andrew M. Cuomo.

The Times’ story, by Danny Hakim, began on pA1 above the fold, and jumps to pA24. The headline: 2 ARE ACCUSED OF VAST FRAUD OVER PENSIONS. The lede:

“Two top advisers to Alan G. Hevesi, the former state comptroller, were charged Thursday in a 123-count grand jury indictment that said they had turned New York’s $122 billion pension fund into a criminal enterprise. The scheme netted them and other Hevesi associates tens of millions of dollars in kickbacks from firms investing the fund’s money, the indictment said.”

This case is by far the most important political corruption case in many years. The State Comptroller makes many decisions regarding how the moneys in the pension fund are invested. Companies that wish to receive funds hire agents to assist them, and Mr. Morris became a highly successful agent because he was Mr. Hevesi’s campaign manager.

Morris is alleged to have received thirty million dollars in commissions from those firms that hired him to get the pension fund to invest in them. He concealed these transactions by various methods described in the indictment.

As you know, we are used to writing about political corruption; unfortunately, it is all too common in Albany. But the enormity of this scheme far outstrips the previous record holder among accused influence peddlers, former Senate Majority Leader Joseph L. Bruno, who was said to have taken $3.2 million from various groups seeking state contracts or other benefits.

Several questions arise:

What, if anything, did Alan Hevesi get out of the scheme, under which his campaign manager is alleged to have received thirty million dollars? If he did share in Morris’ alleged loot, where are the funds concealed. Hevesi could not have lost all of it in the stock market, or in a Ponzi scheme.

Whether he received money or not, how could Hevesi have tolerated an obviously criminal operation in his own office? A Ph.D. in political science and a college professor, Hevesi was known to be among the most intelligent of public servants, and an authority on gaming the system, particularly the pension plan.

It appears inconceivable that such an extensive and far-reaching fraud could take place without his knowledge and tacit consent. Could Morris have been cheating Hevesi? It is difficult to believe that such a previously highly respected and well-educated figure could betray his oath of office and engage in such rampant criminality.

Even Eliot Spitzer was not accused of cheating the government.

We defended Hevesi in 2006 when he was pilloried for using his car and driver to take care of his sick wife. What he did then was wrong, but it did not justify the removal from office of a state-wide official just re-elected by the voters after a campaign in which the facts of his misuse of the car were widely publicized. In a democracy, public approval can cleanse an official from minor offenses.

But this is an entirely different matter. If proven, the charges indicate a colossal misuse of high office and betrayal of the public trust. The last such omnibus indictment came in the case of former Assemblyman Brian McLaughlin, now awaiting sentencing for a panoply of offenses from selling jobs to stealing from a Little League.

The Morris-Loglisci indictments were widely publicized. The Post story, on p5, DEM DUO IN $30M PENSION ’SCAM’, 123 ‘PAY TO PLAY’ RAPS, was written by Brendan Scott in Albany and Laura Italiano in New York.

The Post carried Attorney General Andrew Cuomo’s strong statement: “Morris used the fund as his own piggy bank. The indictment charges crimes that go beyond the grossest manifestations of pay-to-play.” The Post also reported that the “indictment mentioned two anonymous co-conspirators, including one high-ranking Hevesi official who allegedly took hundreds of thousands of dollars in bribes, including cash and rent payments for his girlfriend.

A source familiar with the investigation identified that person as Hevesi’s former chief of staff, Jack Chartier, who was dating one-time ‘Mod Squad’ star Peggy Lipton.” Chartier and Lipton have been mentioned previously in connection with the misuse of state cars assigned to the Comptroller.

A Post column by State Editor Fredric U. Dicker was published on p5 as well: The headline is GRAFT JUST LIKE BAD OL’ DAYS OF TAMMANY. The lede:

“Longtime Democratic political consultant Hank Morris saw his opportunities when Alan Hevesi became state comptroller in 2003. As Tammany Hall’s George Washington Plunkitt famously declared to justify what he called ‘legal graft’ -- 'I took 'em.'"

The Daily News put the story at the top of p2, with the headline, OUT OF CONTROL: 2 Top Former Hevesi Aides Indicted in Huge Pension Fund Kickback Scheme. The news report was written by Kenneth Lovett and Melissa Grace. Their lede:

“A key political consultant and a top aide to former Comptroller Alan Hevesi were slapped with corruption charges yesterday over the state’s $120 billion pension fund. State Attorney General Andrew Cuomo, whose office conducted a two-year pension fund probe, warned there could be more indictments.”

OUR OBSERVATIONS:

1) This is a really bad case. Pay to play is never a sound practice, but it is widely tolerated in small amounts. When large sums are required to be raised for political campaigns, incumbents know that the individuals and corporations with whom they deal are natural feeding grounds. What is alleged to have happened here goes far beyond what any reasonable person would tolerate.

The defense lawyers contend that the state did not lose a penny because of the fees paid to their innocent clients. That is ridiculous to us; if the companies did not have to bribe their way into getting contracts, they would have been able to pay the $30 million to the State of New York rather than to the fixers. And who can tell whether they were offering the best opportunities to the fund?

2) Another question arises regarding whether the State pension fund investments obtained through bribery were financially sound. Did the terms of the transactions provide the pension funds with the best possible rate of return? Did any of the investments fail?

3) If the office of the State Comptroller was operated for four years under Hevesi as a criminal enterprise, as the Attorney General alleges, did any of its thousands of employees complain about what was going on? Were the employees threatened in any way? How much money, if any, did the State lose by not being able to make investments that might have been more remunerative for the pension fund?

4) How many other people, State employees or not, were involved in this scheme? Did Morris and Loglisci, like Bernie, do it all by themselves?

5) Those paying the bribes, or the victims of extortion (as one might see it) appear to have escaped being held accountable. Granted that their co-operation was necessary to the investigation, doesn’t it take two to tango?

We have not seen the last of this matter. It is always possible that the alleged wrongdoers will not be convicted by a jury, or that the case will be thrown out by the judge. If they are convicted, however, we think twenty years is about right, with time off for good behavior, of course. We want very much to deter this kind of conduct by other fixers.

But its not over yet, there are still the sons of both those involved, and those of the dew eyed comptroller. The old adage still holds true- follow the money. And the payoffs through out the organizations involved(the Queens County Democratic Organization), too bad Arthur Nitzburg isn't around to see this.

Dear Henry,I remember discussing this kickback scheme with HL 20 years ago. I assume it has always gone on at approximately this volume level. This time someone's toe was stepped on and they dropped a dime on him. It is an example of how the whole enterprise of government is corrupt.

You show concern about the return to the public. NONE OF THEM CARE A DAMN ABOUT THE RETURN ON THE PUBLIC'S MONEY. In fact they probably put the money in very safe low return investments. That way they avoid a possible investment blow up. The only thing that matters at all is the kickback. As Carville would say,"IT IS THE KICKBACK STUPID".

The Democratic Party in New York is a continuing criminal enterprise and has been for decades.

Now, in place of a felon, we have a Comptroller who is an ignoramus.

There is a case to be made that the State should be put in conservatorship: Hevesi was re-elected by voters who knew he was a felon. Adding his crimes to those of Spitzer, the FELONY rate among Democrat state officials elected in 2006 was 50%. The FELONY rate among NYC county Dem Chairman was eve higher in the 1980s.

Henry,Doesn't this story really point up the need for a pension system not run by the Comptroller as sole trustee? Perhaps in a subsequent column you might treat whatever proposals are out there for reform and how public minded citizensmight influence an apparently much needed change.Thanks for all your good work.T

Perhaps we can just declare bankruptcy for the state of New York, remove all officeholders and start again. They are least morally, if not financially bankrupt. Is it Chapter 11 or 13? No clue as to which. Perhaps the whole country is morally bankrupt. Would this have happened had we stayed part of the UP.K. ? The Brits seem to have more problems with sex rather than money. That's healthier in my view. Higher level of development. I will be able to attend if I can change some patient appointments.